Raising capital is a significant step in the development of any business
It is when a company reaches the stage in its lifecycle when it is taking on new partners in the form of investors. One of the main challenges these management teams face is how to share their story with investors; making sure to demonstrate the company’s value as an investment and relay how the investor’s capital will enable profitable growth.
As the head of Customer Support and Onboarding for iownit, I am fortunate to spend a significant amount of my time with the leadership of various companies that are looking to raise capital from investors. These teams are made up of some of the most impressive individuals I have ever met, and they hold the keys to the kingdom when it comes to business decisions, especially decisions around raising capital.
Though I have not raised capital for my own venture, I can feel and empathize with the excitement and stress I hear in all these entrepreneurs’ voices. Through my daily interactions with these innovative companies, I tend to see two different flavors of management teams that are looking to raise capital.
These companies are the easiest to work with and are most likely to have a successful capital raise. Typically, these companies have management teams that have raised capital before and understand what type of information is required for investors looking to commit capital to their venture. Equally important, they understand that people don’t want to be sold anything, and prefer to buy into a company based on its merits as an investment opportunity.
The central theme for these companies is that the management team has little experience raising money and they do not have advisors who are willing to help them properly prepare for what capital raising entails. They may believe that raising capital will be quick and easy, that the CEO can handle it, or that they have the best widget, but they forget that investors are looking for investments, not just sexy products.
Recommendations for management teams raising capital
- Get help – plan to assign 25% of someone’s time to manage the process and free up their time to do so. Different companies will require more or less work depending on their collective experience and preparedness to raise capital, but it is usually not realistic to think that it can be done in their spare time. Also, don’t underestimate the value that a few experienced advisors can bring
- Engage a lead investor who is respected in the field and is willing to commit capital. This is very beneficial as it informs the investor pool that you have backing from someone who’s an expert in the field
- Plan in advance – Traditional capital raises can be a 12-18-month process. While we think that raising capital in a digital world, like iownit, can significantly reduce the time required, a company still needs to allocate sufficient time to properly plan and execute
- Be willing to dedicate time from the management team – who else knows the product and the business better? A management team with diverse experience should be able to help put together an attractive investment
- Make sure your offering materials cover the merit of the investment, and not just the sexiness of the product
The key to success is being prepared, especially when it comes to the long term success of your vision. As you head into fundraising mode, this preparedness will allow you to stand out from other companies amongst investors. Investors today are wary of risk, and want to invest in teams they believe can execute on their vision. A powerful way of conveying your leadership capabilities is by showing up at the fundraising meeting (or video-meeting) as prepared as possible.
Please be smart and stay safe.
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